Fair tax: Now more than ever

Public education, preschool critical to level social playing field, but require funding, especially in pandemic

At a time when we’re questioning the basic structures of government to address social disparities, what about tried and true measures like funding public education and preschool through a graduated income tax? (Shutterstock)

By Ameya Pawar and Ted Cox

If you’re looking for a way to address social disparities — the hot topic right now with the focus on entrenched systemic racism — what better way than a fair tax?

In a way, it’s a solution by definition. What Gov. Pritzker has championed as a “fair tax” is also simply a progressive or graduated income tax. It’s designed to be fair — much fairer than a regressive flat income tax — and to tax the economy where it’s growing and producing the most money, while shielding those who are struggling with less.

So it would appear to be the perfect device to attack a recession stemming from a pandemic, but it also serves to minimize the effect of that pandemic and to fund the devices that work best to address social disparities at their roots: public education and especially preschool education and early childhood development.

We’re at this moment when people are questioning the way we’re doing things, even as it relates to public safety. We know it’s not working as currently constructed. But at the same time what we do know is that study after study after study shows that investment in early childhood, investment in public education pays off in improving people’s lives and reducing social inequity. So what’s keeping us?

Pritzker stressed those very same priorities when he proposed the latest state budget in February, and he reemphasized them last week when he signed the $43 billion budget passed by the General Assembly into law, in spite of reduced revenue estimates caused by the economic slowdown brought on by the COVID-19 pandemic. His administration emphasized that the budget “maintains funding for critical programs, such as education, health care, and human services.”

Expanded early childhood education has been a foundation of Pritzker’s platform all along, and just six months ago he recommitted to it by bolstering the Child Care Assistance Program and declaring, “From our aggressive efforts to secure federal funding to our historic investments in early childhood programs and facilities, Illinois will become the best state in the nation for families raising young children,” a statement he repeated in his budget address. “We have so much more to accomplish for Illinois families and their children, and this administration will continue investing in the care and education our kids need to succeed.”

The question is where does the money come from to fund some of the best tools at our disposal to address social inequity, especially with diminished revenues in a pandemic?

As we’ve reported before, it could come from federal COVID-19 relief funding passed by Congress for state and local governments, or it could come from the Federal Reserve providing stopgap loans to those same government bodies, but the federal response on both those fronts has thus far been disappointing. The initial CARES Act relief package went for the most part to millionaires and big businesses. The ensuing HEROES Act recently passed by the U.S. House, which Rep. Cheri Bustos of Moline has said would allot a third of its $3 trillion to state and local governments, is mired in the Senate under Majority Leader Mitch McConnell. The Federal Reserve, meanwhile, has created a $500 billion fund, the Municipal Liquidity Facility, to provide loans to local governments, but at a cost in interest.

When the COVID-19 economic collapse stemming from efforts to mitigate the pandemic first took hold, the Fed backstopped corporate borrowing in a bid to halt the stock-market crash. It has bought debt and provided no-cost loans to businesses, including what Time magazine just this week described as “corporate junk debt.”

“There is now a backstop on corporate debt,” said Scott Minerd, chief investment officer at Guggenheim Investments. “We have now socialized credit risk.”

Fed Chairman Jay Powell has defended those measures as a way to save jobs, but his saying that hasn’t made it so. As stock prices revived, giving back billionaires the money they’d lost in the initial March and April crash, unemployment kept rising. U.S. Sens. Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio both attacked the Fed for “bailing out financiers instead of workers,” as Time reported, with Brown stating: “The Federal Reserve is always creative about helping Wall Street and corporations during crises, but workers get left behind.”

And when it comes to state and local governments needing to make up lost revenues, those affected workers include teachers, firefighters, and police officers — essential services, as Pritzker has repeatedly pointed out.

State and local governments are going to need that federal relief, but in Illinois they could also benefit from the fair tax. When he first announced his budget proposal for the fiscal year starting July 1, Pritzker said he’d be holding back $1.4 billion contingent on the progressive income tax passing a statewide voter referendum in the November general election — as it must pass by a 60 percent supermajority to amend the state constitution simply to allow a graduated income tax instead of the flat tax currently demanded by state law.

Although a 60 percent majority is a difficult hurdle to leap, political pundits have increasingly indicated it’s likely to pass thanks to overwhelming public support, as the tax brackets already laid out by Pritzker and the General Assembly would leave tax rates level or slightly reduced for 97 percent of Illinois taxpayers, while only the top 3 percent of wage earners making more than $250,000 a year would pay more — at a top rate of under 8 percent, less than the top brackets in Iowa or Minnesota. Republican legislators tried to remove the tax referendum from the ballot during the abbreviated session of the General Assembly last month, citing the pandemic as an excuse — a tactic Pritzker, for one, said demonstrated they expect to lose that referendum. Just last weekend, meanwhile, state GOP Chairman Timothy Schneider spoke out against voter ratification of the fair tax — as Senate Minority Leader Bill Brady of Bloomington has before — but in his remarks to a virtual state party convention Schneider seemed much more intent on bolstering President Trump as a “man for our time,” according to the Chicago Tribune, and to looking ahead to taking on Pritzker again in 2022.

The times are dire, as a pandemic continues to rage and as new incidents of police brutality prompt protests that call into question the entire entrenched system of institutionalized racism. That has made our society increasingly open to proposals that once seemed almost unthinkable, including the call to “defund the police” — meaning to reallocate government funding to address the core issues, such as homelessness and mental health, police have been unfairly forced to deal with. So why not embrace a more established proposal like refunding education — both K-12 public education and preschool — as a sensible way of addressing social inequity at the roots? All it takes is the commitment to find and allot that funding.

There’s always been money for police after crises like Sept. 11, but when it comes to improving social mobility the question is always how do we pay for it? The fair tax is one way, and people seem increasingly eager to embrace that sensible proposal, even in a pandemic — maybe, in fact, most of all in a pandemic.